PPF Account Advantage and Disadvantage

Advantages and Disadvantages of PPF Account

Savings Accounts are the most popular type of bank accounts meant for saving of your amount and getting interest on it. You have the flexibility of deposit your fund to or withdraw your fund from the account based on your requirement. Banks provides cheque facility to savings account holders. It can be opened and operated either in single name or in joint names. Generally, all the salaried employees as well as the pensioners have this type of account. The rate of interest offered on such account is between 4% to 7% per annum. With effect from FY 2012-13, interest earned on savings account upto Rs 10,000 in single financial year is exempted from tax.

Advantage of PPF account

1. It generates guaranteed returns
2. It is backed by Central Government.
3. It is very flexible means you can invest in instalments as well as lump sum. The minimum subscription amount is also minimal which is just Rs 500/- per year.
4. The contributions made to PPF account can be claimed for tax rebate under Section 80C of Income Tax.
5. Interest earned on the PPF account is tax free
6. The maturity proceeds are exempt from tax
7. It can be opened in the name of minor along with guardian.
8. Loan facility in PPF account is available which can be availed between 3rd to 6th financial year.
9. Partial withdrawal facility in PPF account is available which can be availed from 7th financial year onwards.
10. PPF account can be extended for a minimum term of 5 years on in multiple of 5 years thereon as long as the account holder wishes.

Disadvantage of PPF account

1. It cannot be opened by HUF, NRIs, Trust etc.
2. Lack of liquidity.
3. It has a big lock-in period of 15 years
4. There is a capping of Rs 1.5 lakh per annum on deposit of amount in a PPF account.
5. PPF account cannot be closed prematurely(except in case of death)
6. Joint account is not permissible.